Gas stations start to refuse credit cards because of transaction fees

CHARLESTON, W.Va. -- When gas station manager Roger Randolph realized it was costing him money each time someone filled up with $4-a-gallon gas, he hung a sign on his pumps: "No more credit cards."

He may be the first in West Virginia to ban plastic, but gas station operators nationwide are reporting similar woes as higher prices translate into higher credit card fees the managers must pay, squeezing profits at the pump.

"The more they buy, the more we lose," said Randolph, who manages Mr. Ed's Chevron in St. Albans. "Gas prices go up, and our profits go down."

His complaints target the so-called interchange fee, a percentage of the sale price paid to credit card companies on every transaction. The percentage is fixed, usually at just under 2 percent, but the dollar amount of the fee rises with the price of the goods or services.

As gas tops $4 a gallon, that pushes fees toward 10 cents a gallon. Stations, which typically mark up gasoline by 11 cents to 12 cents a gallon, now are seeing profits shrink or even reverse.

"It's a huge deal for us," said Carl Boyett, chief executive officer of Boyett Petroleum of Modesto, which distributes gasoline to stations and owns 35 of its own in California. "It's more than employees. It's more than rent. It's more than anything."

Boyett is vice president of the Society of Independent Gasoline Marketers of America, which is urging Congress to allow serv- ice stations to negotiate lower fees with credit card companies. They cannot do this now because of an anti-trust exemption that these companies enjoy, he said.

Randolph said that in a good month, his small operation would yield a $60 profit on gasoline sales. But that's been buried as soaring prices forced the station to pay about $500 a month in interchange fees.

"At these prices, people aren't making any money," said Jeff Lenard, spokesman for the Alexandria, Va.-based National Association of Convenience Stores. "It's brutal."

Lenard's group reports conven- ience stores paid $7.6 billion in credit card fees last year, while making $3.4 billion in profits.

The National Retail Federation says gas prices point to the unfairness of the system: Gas stations are paying more in interchange fees because the price of gas has gone up, while the cost of processing credit or debit cards remains the same.

"We have always contended that it doesn't cost Visa and MasterCard any more to process a $1,000 transaction than it does a $100 transaction," said J. Craig Shearman, vice president of government affairs at the retail federation.

The credit card companies say fees are just part of the cost of doing business.

MasterCard has capped interchange fees for gas purchases of $50 or more, company spokeswoman Sharon Gamsin said.

Accepting MasterCard also gives gas stations "increased sales, greater security and convenience, lower labor costs, and speed for their customers at the pump," Gamsin said in an e-mail.

Visa argues that the fees are offset "by the tangible benefits to stations and their customers, such as the ability to pay at the pump," the company said in a statement.

Absent congressional action, gas stations are seeking other relief, including discounts to customers who pay in cash.

The experiment at Mr. Ed's Chevron, though, has paid off so far.

The station has been in business for 44 years and the ban on plastic hasn't scared many people off, Randolph said.

"We've got generations of customers who come here," he said.

"Most of them have accepted it."

Bee staff writer John Holland contributed to this report.

This story was originally published June 21, 2008 at 11:19 AM with the headline "Gas stations start to refuse credit cards because of transaction fees."